Smart, modular updates for the next generation
In a world of endless choice, wealth managers and private banks have clients who are more discerning than ever before. They expect a seamless digital journey and the kind of personalisation they experience on their social media platforms.
AI is also beginning to reshape those expectations. Some clients are already using AI at home to research, compare and question decisions about their finances, which creates a new challenge for wealth managers and private banks: how to remain relevant when clients arrive better informed, more confident, or at least more AI-assisted than before. As AI becomes more embedded in daily life, firms will need to think carefully about how they preserve trust, relevance and human value in the advice relationship.
At the same time, the industry is facing a major generational shift. Trillions of dollars are expected to move between generations over the coming decade1, reshaping not just who clients are, but what they expect from their wealth provider. The next generation is more digitally fluent, more demanding and less automatically attached to the bank their parents used.
Wealth institutions must modernise to meet these expectations but also have to weigh up the cost, complexity and disruption of building these capabilities.
Although globally, three-quarters of investors have moved to digital platforms to invest at least some of their portfolio, and 55% use a hybrid blend of digital and analogue, there is still a preference for financial services that also have a bricks-and-mortar and human presence2.
For those who don’t use digital investment platforms, the primary factors holding them back are wanting to speak to a person when dealing with their finances (30%) and not knowing which platform is trustworthy (25%)2.
So, the ideal solution for wealth managers and private banks is to offer full, state-of-the-art digital capabilities backed with the reassurance of a human contact whenever it is needed. What will set providers apart is the ability to build investor confidence through intuitive design, embedded guidance, and a seamless bridge to human advice when it matters most.
What the ‘next generation’ of customers wants
Increasingly digital-native customers are demanding a high-quality experience from their wealth manager. They want a straightforward onboarding process, more interaction from their service providers, more customisation and differentiation, accounts and portfolios that are easy to manage and a service that feels fully and immediately responsive. Put simply, they expect bank-grade service plus consumer-grade experience – that means speed, transparency, control and personalisation are now a minimum standard.
Competition from the digital-only services is ever present, with challenger banks regularly scoring the highest customer satisfaction ratings.
This challenge is only intensifying as intergenerational wealth transfer reshapes the client base. The inheritors of wealth are likely to be less loyal to legacy institutions and more willing to switch if the experience does not meet expectations3. For firms, that makes the ability to combine convenience, confidence and personal service even more important.
What institutions want
There’s no doubt that financial institutions want the benefits of the latest investment management software too – highly responsive systems that will bring every aspect of managing their clients’ money into the future: from reporting services to analytics, monitoring, execution and engagement that feels personalised and differentiated.
However, institutions are finding they have to offer more and more services with less resource as margins continue to come under pressure. This often involves trying to keep up with the use of manual workarounds, patches and fragmented upgrades. And there is still an onerous and ever-evolving burden of regulation and compliance to adhere to.
MiFID II, DORA and ESG-related requirements continue to increase both the operational burden and the cost of change. That makes transformation harder to execute internally, and it also helps explain why many institutions are increasingly looking to specialist technology partners to reduce implementation risk while staying aligned with regulatory expectations.
As a result, there is a growing demand for new technology to provide solutions that are realistically priced, can offer all the tools required and can scale quickly as businesses grow.
The case for modular technology
Wealth institutions do not need a full transformation programme to start improving outcomes.
These challenges do not necessarily mean that financial institutions need to replace their entire portfolio management software infrastructure. In fact, a rip-and-replace approach is usually hugely expensive, disruptive and often the wrong answer. Usually, the most effective approach is to upgrade selectively.
Modular technology allows new capabilities to be added onto existing systems without a wholesale transformation. Bolt-on engines can be implemented one area at a time, allowing institutions to address their top priorities without the cost, disruption and risk of a complete overhaul.
Institutions can reap the benefits of a phased modernisation by starting where the friction is highest and ROI can be delivered fastest. This is a lower risk and much less disruptive approach.
It also changes the economics of technology investment. Rather than committing to a large programme upfront, institutions can invest in areas where the return is clearest and build from there.
Client reporting is often an early priority, followed by discretionary and managed client journeys. Once these are delivering value, other modules can be introduced as budgets evolve. This means smaller investments, less disruption and a technology capability that can expand with the business.
Modular does not have to mean standardised
While the new technology can integrate with existing infrastructure, the institution’s own requirements, processes and proposition can be configured around it. The aim is not to simply automate processes, but to create digital experiences that retain the differentiation and service levels clients expect. The benefit of the modular approach is that it offers standardised capabilities, with highly differentiated and fully customisable delivery.
Build systems or buy them in?
For years, the industry has moved between the two choices: building systems in house to retain control or outsourcing to access specialist expertise and accelerate innovation. Currently, new AI tools are encouraging another wave of in-house development, but building technology requires specialist talent, governance, security protocols, a maintenance regime and ongoing investment.
Buying in capability should not mean that an institution has to give up control. The right technology partner can provide the specialist resource and ongoing support while allowing the institution to retain ownership of its client proposition and proprietary information.
That becomes even more relevant as AI capabilities evolve. Firms that partner well can move faster while still maintaining the governance, security and oversight required in a regulated environment.
The next step for technology strategy
The question for financial institutions is no longer whether their core technology needs to be completely replaced. Instead, it is about identifying which parts are causing the most friction and can be upgraded more quickly to deliver value sooner.
For wealth managers and private banks wanting to improve client experience, control costs and innovate faster, selective modernisation can offer an efficient, pragmatic and surprisingly rapid way forward.
The first step is to identify the problem areas, the blockages and the gaps. Where is the existing infrastructure holding the business back? Then add in the capabilities needed to move forward – without waiting for the five-year transformation programme to deliver them.
Which parts of your tech stack are genuinely differentiating, and which are constraining what your business can offer? This is where a modular approach to technology can make a difference.
ALTO Wealth & Distribution offers a modular path forward for private banks and wealth managers looking to modernise without starting over.
